IWM (representing Rus'2000 small cap)
The volatile small cap R2K index is weak, and looks set for a move to 70/67 within the near few months. This would equate to a drop of around 15% or so, in addition to what we've seen so far.
Nasdaq Comp
The once mighty tech sector is now seeing major upset. The once beloved AAPL has now fallen some 20% from the $700 highs, and although there are still some analysts touting $1000 in 2013, there are quite a few who seem resigned to seeing AAPL break the hugely psychological level of $500 within weeks..if not days.
Downside target for the big Nasdaq Comp' is around 2500/2400, which is a good 15% or so lower from current levels
Dow
The Dow has broken key rising support from the 2011 low, and the next challenge is the June 12k low. A break of 12k should open a swift wash-out move to around 11500/11k. When you look at stocks like HPQ, AA, and even DIS, the Dow looks like it will inevitably drop a considerable way into December.
NYSE Comp
The master index is similarly rolling over, although its not yet broken rising support. A break <7750 will be key, and that will open up a move to 7k.
SP'500
The SP' closed Friday under the daily 200 day MA @1379, and looks set to hit my next target zone of 1345/40. From there, a brief bounce seems very viable back to 1400/25..before a much more severe wave of selling, down to the 1200/1175 zone. The time frame on this is difficult to pin down, but is it still feasible we could close the year in the low 1200s - although the usual seasonal 'Santa rally', may delay such lows until the spring.
However, considering the fiscal cliff concerns, and underlying weakening global economy, I'm guessing the big wave lower will come this side of Christmas. That sure won't please the central bankers and national governments who are obviously terrified of declining asset prices.
Transports
The tranny remains a very strange anomaly, and is still largely stuck in a super tight trading range since January. It is a remarkably narrow range, although I'd guess that if the other indexes keep falling, the trans will be dragged lower to what is very strong support in the 4500/4400 zone.
As the 'old leader' of the market, the transports has indeed been warning of 'trouble ahead' since the late Spring.
Summary
Without question we are seeing a clear rollover on the hugely important monthly index charts across all indexes. Yet so far, we're still only 6% from the QE highs in mid-September. It sure wouldn't take much to break to new index highs.
As many have recognised since spring of this year, a US recession does seem likely. I'd look for a significant downward revision to Q3 GDP - due Nov'29th. If I am right, that would perhaps be a major catalyst for a market panic, as the full realisation of a looming US recession needs to be priced in.
On any basis, a move to sp'1200 seems the minimum necessary to reflect near zero growth, never mind actual negative prints of -1 to -2% in Q1 2013.
The nightmare - will it be June again?
The ultimate question is whether the current pullback will be as minor as the one we saw in June. Many back then (including myself) were seeking considerably lower levels, somewhere in the sp'1200/1150 range. Yet, the market floored, and ramped hard on renewed hopes of QE3, and was further pumped up by periodic comments by both Bernanke and Draghi.
Have you noticed lately how we get so few rumours and press releases to kick the market back higher?
I will close out this weekend update with one of my infamous rainbow charts - the 'Elder Impulse system' style, which I particularly favour. We never did see a red candle in the early summer decline, can we close November with our first red candle since Sept'2011 ? It would be a pretty bearish indicator if we do.
sp'monthly3c - things the doomer bears need
As for next week, lets just see how the Sunday night futures open, and we'll take it from there. Well, that's it for this weekend, I will be back on Monday.
Good wishes from London city.